A trader works on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 5, 2021.
Andrew Kelly | Reuters
The Dow Jones Industrial Average was lower on Monday amid global growth concerns, after the 30-stock average notched a record close Friday.
The Dow fell 105 points, or 0.3%, dragged down by a 1.8% drop in Boeing’s stock. The S&P 500 lost about 0.2%. The Nasdaq Composite dropped 0.15%.
Oil prices dropped on Monday, building on last week’s losses, as rising Covid cases caused concern of a slowdown in demand. West Texas Intermediate crude futures declined more than 4% to trade at $65.50 per barrel. The contract traded as low as $65.15 earlier in the session. International benchmark Brent crude declined 3.8% to $68.01 per barrel.
Oil’s slide pushed energy stocks lower. Exxon Mobil and Chevron both lost more than 1%. Diamondback Energy slipped 2.7%.
Tesla shares gained 1.5% after Jefferies upgraded the stock and predicted a rally of more than 20% over the next 12 months.
Berkshire Hathaway’s B shares climbed slightly on the back of a solid earnings report. The conglomerate’s operating income jumped 21% year over year to $6.69 billion in the second quarter as its myriad of businesses from energy to railroads benefited from the economic reopening.
The Dow and S&P 500 closed at record highs on Friday following a strong jobs report. The Labor Department said the U.S. economy added 943,000 jobs in July. Economists expected 845,000 new jobs last month, according to Dow Jones estimates. The unemployment rate dropped to 5.4%, below the expectation of 5.7%.
“You saw a lot more jobs being created in those areas that are reopening — restaurants, hotels, logistics, transportation,” Raymond James Chief Investment Officer Larry Adam said. “That’s a good sign. I think that puts more spending power behind the consumer going forward and I think that that’s ultimately a good thing for the economy.”
However, the signs of a strong economic recovery could prompt the Federal Reserve to pull back its monetary support measures and prepare to begin tapering its bond-buying program.
“If it does continue to this magnitude, that probably does bring the Fed a little sooner into the game when it comes to tapering,” Adam said.
U.S. senators reconvened Sunday to work toward the passage of a $1 trillion infrastructure bill, a top political priority of President Joe Biden. The bipartisan package is expected to have sufficient Republican support to pass this week in the Senate and move to the House for consideration in September.
Earnings season continues this week with companies including Tyson Foods, AMC Entertainment, Coinbase, Lordstown Motors, Bumble, Palantir, Disney, Airbnb and DoorDash set to report quarterly earnings.
Credit Suisse on Monday initiated a 5,000 price target for the S&P 500 for the end of 2022, citing higher earnings. The firm kept its 4,600 target for 2021.
“Over the past 5 quarters, analysts have significantly underestimated EPS, a trend we expect to continue,” Credit Suisse chief U.S. equity strategist Jonathan Golub told clients. “We see upside to estimates as empty shelves are restocked and pricing power is maintained. Consumer spending should improve as the unemployment rate drops further, accompanied by higher wages.”
Investors are awaiting key inflation data scheduled for release this week. The consumer price index and the producer price index are scheduled to come out Wednesday and Thursday, respectively.